Beware The Reverse Brain Drain To India And China

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Editor’s note: This is a guest post by Vivek Wadhwa, an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Executive in Residence at Duke University. Follow him on Twitter at @vwadhwa.

I spent Columbus Day in Sunnyvale, fittingly, meeting with a roomful of new arrivals. Well, relatively new. They were Indians living in Silicon Valley. The event was organized by the Think India Foundation, a think-tank that seeks to solve problems which Indians face. When introducing the topic of skilled immigration, the discussion moderator, Sand Hill Group founder M.R. Rangaswami asked the obvious question. How many planned to return to India? I was shocked to see more than three-quarters of the audience raise their hands.

Even Rangaswami was taken back. He lived in a different Silicon Valley, from a time when Indians flocked to the U.S. and rapidly populated the programming (and later executive) ranks of the top software companies in California. But the generational difference between older Indians who have made it in the Valley and the younger group in the room was striking. The present reality is this. Large numbers of the Valley’s top young guns (and some older bulls, as well) are seeing opportunities in other countries and are returning home. It isn’t just the Indians. Ask any VC who does business in China, and they’ll tell you about the tens of thousands who have already returned to cities like Shanghai and Beijing. The VC’s are following the talent. And this is bringing a new vitality to R&D in China and India.

Why would such talented people voluntarily leave Silicon Valley, a place that remains the hottest hotbed of technology innovation on Earth? Or to leave other promising locales such as New York City, Boston and the Research Triangle area of North Carolina? My team of researchers at Duke, Harvard and Berkeley polled 1203 returnees to India and China during the second half of 2008 to find answers to exactly this question. What we found should concern even the most boisterous Silicon Valley boosters.

We learned that these workers returned in their prime: the average age of the Indian returnees was 30 and the Chinese was 33. They were really well educated: 51% of the Chinese held masters degrees and 41% had PhDs. Among Indians, 66% held a masters and 12% had PhDs. These degrees were mostly in management, technology, and science. Clearly these returnees are in the U.S. population’s educational top tier—precisely the kind of people who can make the greatest contribution to an economy’s innovation and growth. And it isn’t just new immigrants who are returning home, we learned. Some 27% of the Indians and 34% of the Chinese had permanent resident status or were U.S. citizens. That’s right—it’s not just about green cards.

What propelled them to return home? Some 84% of the Chinese and 69% of the Indians cited professional opportunities. And while they make less money in absolute terms at home, most said their salaries brought a “better quality of life” than what they had in the U.S. (There was also some reverse culture shock—complaints about congestion in India, say, and pollution in China.) When it came to social factors, 67% of the Chinese and 80% of the Indians cited better “family values” at home. Ability to care for aging parents was also cited, and this may be a hidden visa factor: it’s much harder to bring parents and other family members over to the U.S. than in the past. For the vast majority of returnees, a longing for family and friends was also a crucial element.

A return ticket home also put their career on steroids. About 10% of the Indians polled had held senior management jobs in the U.S. That number rose to 44% after they returned home. Among the Chinese, the number rose from 9% in the U.S. to 36% in China.

When we asked what was better about the U.S. than home, 54% of Indian and 43% of Chinese said that total financial compensation for their previous U.S. positions was better than at home. Health-care benefits were also considered somewhat better in the United States by 51 percent of Chinese respondents, versus 21 percent who thought it was better in their home country. (Indian respondents were split more evenly on this).

These were a self-selected group, people who had already left. But what about the future, the immigrants presently studying at U.S. institutions of higher learning? We surveyed 1,224 foreign students from dozens of nations who are currently studying at U.S. universities or who graduated in 2008. The majority told us that they didn’t think that the U.S. was the best place for their professional careers and they planned to return home. Only 6 percent of Indian, 10 percent of Chinese, and 15 percent of European students planned to settle in the U.S.

Many students wanted to stay for a few years after graduation if given a choice—58% of Indians, 54% of Chinese, and 40% of Europeans. But they see the future being brighter back home. Only 7% of Chinese students, 9% of European students, and 25% of Indian students believe that the best days of the U.S. economy lie ahead. Conversely, 74% of Chinese students and 86% of Indian students believe that the best days for their home country’s economy lie ahead. National Science Foundation studies have shown that the “5 year stay rates” for Chinese and Indians science and engineering PhD’s have historically been around 92 % and 85% respectively (NSF tracks these 5 years at a time, and the vast majority stay permanently). So something has clearly changed.

For Silicon Valley, and for the U.S., this is the wrong kind of change. To some degree, these responses reflected the moribund U.S. economy and the rough job prospects facing students. With U.S. unemployment at 10%, who cares if we lose the next generation of geeks? There won’t be jobs for them for years, anyway, until the U.S. job market recovers. And sure, I know the xenophobes are going to cheer my findings. They believe that foreign workers take American jobs away.

But a growing body of evidence indicates that skilled foreign immigrants create jobs for Americans and boost our national competitiveness. More than 52% of Silicon Valley’s startups during the recent tech boom were started by foreign-born entrepreneurs. Foreign-national researchers have contributed to more than 25% of our global patents, developed some of our break-through technologies, and they helped make Silicon Valley the world’s leading tech center. Foreign-born workers comprise almost a quarter of all the U.S. science and engineering workforce and 47% of science and engineering workers who have PhDs. It is very possible that some of the smart Indians who sat in the room with me holding their hand up on Columbus Day will start the next Google or Apple. Many of them will build companies which employ thousands. But the jobs will be in Hyderbad or Pune, not Silicon Valley.